US oil producers increase output to capture price surge from Iran war
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US oil producers are increasing output to capitalise on the energy crisis prompted by Donald Trump’s war in Iran and expectations that crude prices will remain higher for longer.
Companies including Diamondback, America’s third-largest producer in the Permian Basin, the world’s most prolific oilfield, and shale driller Continental Resources said they were expanding drilling as oil prices have surged more than 40 per cent, to about $100 per barrel, because of the conflict.
Veteran oilman and Trump donor Harold Hamm, who owns Continental, told the FT he planned to increase capital expenditure by about $300mn to $2.8bn in 2026 in response to higher oil prices.
“We had some room to do something better if prices improved. And for our company that is sizeable and we think it is fitting for where we are today,” Hamm said in an interview. “We don’t expect prices to go back to where they were prior to the Iran war.”
It marks a reversal for Continental, which said in January it would pause new drilling in North Dakota, as oil prices languished below $60, and would not operate a drill rig in the state for the first time in 30 years. Hamm said he was now revisiting that decision because of the surge.
Publicly listed shale producers increased forecasts for capital expenditure this year by $490mn in their first-quarter results when compared with guidance issued three months ago, said Enverus, an energy consultancy.
Producers have added 18 oil rigs since the US launched strikes on Iran at the end of February, bringing the total to 425, with most added in the past month as the price of Brent crude futures has risen to about $75 per barrel in 2027.
“That price is more appealing for operators to start adding activity,” said Alex Ljubojevic, head of supply analysis at Enverus. “That’s what has enabled operators to start putting some additional capital or activity to work.”
The decision to increase drilling follows calls by Trump for producers to boost output in response to a global oil supply crunch that has pushed up domestic petrol prices and dented the president’s approval ratings.
But experts said a modest expansion in US drilling would not make up for the loss of 12mn barrels of oil a day from global supplies caused by the closure of the Strait of Hormuz, a narrow waterway through which a fifth of global oil is shipped.
Low oil prices at the start of the year caused US production to fall to 13.53mn barrels per day in the first quarter, according to the Energy Information Administration.
But the surge in prices caused by the Iran war was expected to cause production to jump by 410,000 barrels per day in the first quarter of 2027, and hit a record of 14.21mn barrels per day by the end of next year, said the EIA.
Until recently large public companies have been wary of expanding production in response to Iran war, fearing oil prices could fall as quickly as they rose if a peace deal is agreed. They have been focused on capital discipline, with investors expecting the windfall from higher prices to go to debt payments and capital returns rather than production.
But Diamondback’s decision to add drilling rigs in response to what its chief executive Kaes Van’t Hof described on May 5 as the “world’s largest oil supply disruption in history” could signal a wider expansion.
US producers already stand to benefit from a $63.4bn boost to cash flows if oil prices remain elevated and average $100 a barrel this year, according to modelling by energy research company Rystad. Americans have already spent more than $40bn extra on fuel since the start of the war, or $316 per household, according to research from Brown University.
Scott Sheffield, an oil industry veteran and former chief executive of Pioneer Natural Resources, said private producers would probably be among the first shale operators to add new drill rigs and production crews. But he said a shortage of high-quality inventory across the Permian was preventing companies from expanding drilling as rapidly as they had following previous supply shortages that pushed up prices.
“People are running out of inventory,” said Sheffield. “If they accelerate any remaining tier one inventory, they’re just gonna run out faster,” he said.
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